Credit: Mukhina1
New laws protecting people entering debt agreements as a way of avoiding bankruptcy have been announced by the Attorney-General, Christian Porter.
Mr Porter described the change as the “most significant reform of the debt agreement system in a decade”, saying it would ensure that debt agreements were reasonable and sustainable.
“Debt agreements are an important and increasingly popular alternative to bankruptcy for individuals who are facing financial difficulty,” Mr Porter said.
“But, over time, it had become clear that aspects of the debt agreement framework and some in the industry were putting financially vulnerable people at risk of entering into agreements which were not affordable – further compounding financial stress.”
He said the new laws would not only protect the interests of debtors and creditors but also improve professional standards in the debt agreement industry.
“Debt agreement administrators deal with some of the most vulnerable people in our community, and the Bill professionalises the industry to reflect its important function,” Mr Porter said.
He said the new laws would also ensure repayments under debt agreements were based on an affordable payments schedule based on a percentage of income which would be decided in consultation with key industry bodies, consumer groups and creditor representatives.
He said that among other reforms the new laws would limit the length of a debt agreement proposal to three years; double the current asset eligibility threshold from $113,350 to $226,700; empower the Official Receiver in Bankruptcy to reject proposed debt agreements which would cause undue financial hardship to the debtor; and require debt agreement administrators to hold and maintain professional indemnity and fidelity insurance.
Mr Porter said the reforms would commence nine months after the Queen assents to the new law, giving industry time to prepare for the changes.
